Executive condos — a low-risk, high-return investment asset?

Mass-market private condominiums and executive condos are perceived as two classes of properties with different investment returns. After all, new private condos carry a higher price tag than ECs. However, is that really true? Looking at the first batch of ECs that were launched in 1996 and 1997 and private condos of comparable age in their vicinity, the investment returns are almost the same.

From their launch dates until end-2015, in terms of price, the performance of ECs has trumped that of general non-landed properties in Singapore. Moving forward, we believe that the long-term price performance of ECs will be further sealed with the government’s focus on raising productivity to sustain income growth. If, say, Singapore’s long-term productivity growth manages to reach 2.5% per annum, wages will likely grow at that rate too. This works its way down to keep annual private property price increases growing probably at the same rate. For private condos, a 2.5% annual price growth is an exceptional return because it trumps the historical returns, as seen in Table 1.

For those who are qualified to purchase an EC, they stand to gain a windfall because, for a start, ECs are priced at a discount to private condos. For this study, we have selected an EC that is still being marketed in one of the newer housing estates in Singapore. The price difference between this EC and a sample of new private condos within a 2km radius is a steep 27% (see chart).

Chart

For the selected EC development, which is equipped and furnished to modern condo specifications and selling at a 27% discount to new private condo prices, once the minimum occupation period (MOP) ends (say, 4Q2022),...

Edgeprop.sg (previously known as The Edge Property Singapore) – is the best property portal for home-seekers, buyers, investors and real estate agents alike. On EdgeProp, you will be able to find all the latest news and views, informational guides, historical transactions and rental searches, and research data and analysis.

Make better decisions with our easy-to-use free and paid tools. The Edge Fair Value tool lets users calculate the fair value of a property and find properties below market value. Meanwhile, using a logit model, our En Bloc Calculator helps to determine the probability of a project being put up for collective sale.

Aside from that, EdgeProp also offers a market trend tracker that lets you access historical property data, sales volume and compare how similar properties are selling, a heat map that lets you find out where all the most popular property sales locations are, a HDB lease tool that lets you calculate your HDB tenure, an affordability calculator, and a property watch list to track your preferred property by project or location, as well as new launches.

On the lookout for undervalued property or buying to rent? EdgeProp’s powerful search filters let you personalise your property-seeking experience – whether you are looking for a property near MRT stations, amenities like schools and childcare centres, or a good-value condo with a sea view – so that you find exactly what you are looking for.